Loan modifications may make loans more affordable by lowering the required monthly payments. Modifications may also make sense for lenders because modified payments can be better than the loss through foreclosure.
If you are struggling to pay or have already defaulted on your mortgage, you can take action to avoid foreclosure. While each homeowner's situation is unique, here are some guidelines on getting help.
Talk to your servicer
Communicate with your servicer. You’ll want to speak with someone in the “loss mitigation” or “loan modification” department. Keep detailed notes of each conversation and write down the name and contact information for each person you speak with. Ask if they will keep computerized notes of your conversation, and, when someone will get back to you. If no one responds, contact the company again. Keep copies of every document that you send.
Utilize the 90-day “right to cure”
If a servicer or lender claims you are in default, they must give you a written notice. The written notice must say that you have right to cure that default and 90 days to do so. The 90-day "right to cure" period is an opportunity to allow homeowners to make back payments or, apply for a loan modification, before having foreclosure-related fees added to their balances.
You also have the right to receive a detailed accounting of your mortgage loan. Some servicers may give you a computer print-out that is difficult to understand. Tell your servicer that you want a more detailed explanation of the amount you owe. Ask that the amount include attorneys' fees, costs, and late charges. Ask for an explanation of any item you do not understand. Examine any amount the lender says it put in an escrow account and any amounts for insurance or real estate tax payments. If you believe any item is unreasonable or incorrect, write a letter explaining your position and ask that they remove the charge.
Organize your documents
In order to be reviewed for a loan modification, you may need to fill out an application with your mortgage servicer. You may also need to provide documentation of your income, assets, and debts. This documentation might include tax returns, bank statements, a recent utility bill, and proof of income, which includes paystubs, profit and loss statements, rental leases, and benefit award letters. The mortgage servicer will likely send you a loan modification application in the mail or one may be available for download on the servicer's website. The more organized you are, the sooner the mortgage servicer can provide an answer.
Understand what a modification can and cannot do
The goals of a modification are to: prevent foreclosure and make your payments affordable so you can stay in the home.
A modification may lower your interest rate.
A modification may extend the term of your mortgage loan. This lowers your payments but increases the time over which you pay.
A modification may reduce the principal of your mortgage loan. But, principal reduction is not guaranteed and many servicers do not offer it.
The modification may increase your obligation or create a large balloon payment at the end of the loan. Only you can decide to accept a modification. Make sure you understand all the terms of the modification before you sign an agreement.
Reporting issues with mortgage servicers
The Consumer Financial Protection Bureau (CFPB) has made standards for mortgage servicing. You can find these in the Code of Federal Regulations, Title 12, Chapter X. See particularly Regulation X (Part 1024). To contact the CFPB, call (855) 411-2372 or file a complaint.
If your mortgage servicer is a national bank such as Bank of America, Wells Fargo, Citibank, or JP Morgan Chase, then you may want to file a complaint with the Office of the Comptroller of the Currency (OCC). The OCC is the federal regulator of national banks. To file a complaint call 1-800-613-6743 or visit the OCC's website.
If you applied for a loan modification but are having problems working with your servicer, and the mortgaged property is your primary residence, then the Massachusetts Attorney General's Office may be able to help. Sometimes we are able to help with communication problems, or may be able to help in getting a decision on loan modification options. To see if we may be able to assist you, call us at (617) 727-8400 or file a consumer complaint.
If you have an issue regarding a state chartered bank or credit union, you may want to file a complaint with the Massachusetts Division of Banks (DOB). The DOB oversees state-chartered banks and some credit unions. The DOB also oversees Massachusetts laws and regulations about modification and foreclosure processes. To contact the DOB, call (617) 956-1500 or email email@example.com.